Correlation Between Sun Life and Teradyne

Can any of the company-specific risk be diversified away by investing in both Sun Life and Teradyne at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sun Life and Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sun Life Financial and Teradyne, you can compare the effects of market volatilities on Sun Life and Teradyne and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sun Life with a short position of Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Teradyne.

Diversification Opportunities for Sun Life and Teradyne

0.1

Correlation Coefficient

Sun Life  Teradyne

Average diversification

The 3 months correlation between Sun and Teradyne is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne and Sun Life is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sun Life Financial are associated (or correlated) with Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Sun Life i.e., Sun Life and Teradyne go up and down completely randomly.

Pair Corralation between Sun Life and Teradyne

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.85 times more return on investment than Teradyne. However, Sun Life Financial is 1.18 times less risky than Teradyne. It trades about -0.02 of its potential returns per unit of risk. Teradyne is currently generating about -0.13 per unit of risk. If you would invest  5,639  in Sun Life Financial on December 4, 2024 and sell it today you would lose (51.00) from holding Sun Life Financial or give up 0.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sun Life Financial  vs.  Teradyne

Sun Life Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Teradyne

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Sun Life and Teradyne

The main advantage of trading using opposite Sun Life and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Teradyne can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Teradyne will offset losses from the drop in Teradyne's long position.

The idea behind Sun Life Financial and Teradyne pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.